My New Blog

The American public, our Banks and our Government were invited to a back yard get-together to discuss the misunderstanding called our economy while throwing back a couple of brews. The banks talked trash and blamed all of our ills on aliens (out of our world or not, your choice) because taking responsibility would be, well you know, irresponsible. They really do not want to do loan modifications because they can make more money if our homes go into foreclosure. It is all about the Benjamins, and lots of them. The Banks are still using our money to make risky investments such as credit default swaps: providing insurance against investments; a strategy that Paul Volcker, the former Fed chair from 1979 to 1987 and a current advisor to President Obama, said should be outlawed. The Banks argued that the more money they make and the bigger they get, the hefty bonuses paid will trickle down to us little people. Our Government pointed out that the longest recession since World War 2 ended in July with the stock market’s remarkable one month recovery. The second quarter of 2009 our economy did not perform as poorly as everyone feared; demonstrated by the gross domestic product numbers: the measurement of all goods produced by Americans from make-up to cars. Also, the housing market has glimmers of hope in many parts of the United States. The stimulus plan for cash for some clunkers is a huge success for foreign auto makers. Our Government was giddy that our BFF, the Chinese, came through again and purchased treasury bonds so that our interest rates would stay low for another month or so. As we, the American Public listened and reflected on the unemployment and our savings, ordered a Kamikazi shot to go with our brew, since we are paying for it anyway.

FYI: The new Arizona foreclosure deficiency act goes into effect in September. It is reported that some banks are holding off on foreclosures until October, so they can go after the owners of investment properties for deficiencies. Question: How did this become law?

The Economy Cupcake

If you had married a partner that refused to work, spent all of your money, trashed your house and did not support you in your dream of expanding your career, would you stay together? President Obama betrothed Ben Bernanke, the 14^th chairman of the Federal Reserve, for a second term to enthusiastic approval. What were his accomplishments during his first term? Are those crickets chirping? Can’t think of anything? Well, he is kinda cute with that beard and he promises things will get better. In another part of President Obama’s house, Timothy Geithner is still allowing the banks to invest in opaque financial risks (read: no one understands what they’re doing with the money). The FDIC has sent up warning flares: their money tree needs some new leaves. As a result, Banco Santander, BBVA, was allowed to purchase the failed Guarantee Bank last Friday. Spain’s second largest bank managed to avoid the worldwide chaos by staying away from toxic obscure investments and achieved steady, boring profits by lending the old fashion way to consumers and businesses. The three oversized boys: Chase, Wells Fargo and Bank of America have been deemed too big to fail. Those darn kids! We gave billions of dollars to rescue them along with AIG when they did bad things to our economy. Now they arrogantly do as they please since Papa Obama and family will rescue them again, no matter how many trillions of dollars it will cost. According to CNN, an eye-popping 40% of the New York Stock Exchange on Tuesday was traded with stocks from Uncle Sam’s step children Fannie Mae, Freddie Mac, Bank of America and Citigroup, keeping it all in the family.

FYI: Kash for Klackers: The next government stimulus program coming later this fall will implement cash rebates to encourage purchases of new energy efficient appliances to include refrigerators, washers, dryers, dishwashers, and wine coolers. About time. My old wine cooler holds only bottles and I need a bigger one that will accommodate boxes.

BY DIANE GERDES....THE "ECONOMY CUPCAKE"

Effective July 30^th the Feds mandated yet another change to mortgage industry by amending the guidelines to the Truth in Lending Act or TIL (TILA). So what is the TIL? It is the form that has been in all loan packages since 1968. It discloses the total amount of interest paid over the term of the loan: is it assumable, does it have a prepayment penalty, and oh, yeah, least I forget, it states the APR or annual percentage rate over the life of the loan. Don’t cross your eyes and stop reading. It will affect all of us in the real estate world. So what is a TIL? According to Wikipedia the definition is as follows: The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to protect consumers in credit transactions, by requiring clear disclosure of key terms of the lending arrangement and all costs.

Before you fall off your chair laughing hysterically at the word “clear”, the law states that a lender is only required to mail the TIL (along with a good faith estimate) within three business days of receiving a loan application. The good lenders disclose accurate lending fees, impound costs and title fees and require the borrower to sign the documents at application. No post office involvement. I know you will find this hard to believe but a lot of lenders including major banks will go light on the title fees or impounds for taxes and insurance to give the appearance of having fewer costs than their competitors. What is the APR? The annual percentage of rate (APR) describe the interest rate for a whole year, annualized, rather than just a monthly rate. It is a finance charge that includes the following PFCs or prepaid finance charges: monthly mortgage insurance, upfront mortgage insurance (such as the VA funding fee or FHA’s fee), origination fee, discount points, title escrow fees, title courier-e-mail fees, underwriting, document preparation, processing fees; expressed as an annual rate. Stay with me, it does it get a lot more exciting.

So what is the big deal? The loan officer takes the application, explains the good faith and the TIL, the client signs and everyone is happy. Except the new changes state that a lender must wait three business days after delivery of the disclosures before collecting money or ordering an appraisal. The banks that were demanding upfront application fees are scrambling to rethink their process. And the Truth in Lending form’s Annual Percentage Rate cannot vary by more than .125 or the redisclosure clock starts again. It will be imperative that the lenders have all fees correct, both theirs and the title companies, when the interest rate is locked and that the client acknowledges receipt. Some banks require signatures, some do not. Signing and returning should be required, but that is just me.

Where it gets to be a spicy is at docs. If the APR is not within guidelines, the redisclosure clock of three business days starts yet again. Some banks are requiring the redisclosure even if the initial disclosures are correct. (They must not need any additional business)

Float down the interest rate at docs if the rate is better? Forgetaboutit. Unless everyone is happy to wait additional days to close. Did you get your client a better rate than originally discussed at application….but forgot to have them sign another TIL and Good Faith? That is going to hurt.

The good lenders will not be affected by the changes. Their attention to detail will be paramount to meeting the close dates.

The lenders that guessed at their fees and titles’ or have not learned to construct an accurate good faith with the truth in lending (the PFC buttons on the GFE’s need to be clicked to transfer over to the TIL) may feel like they have been tasered by the Fed police.

If only there had been more disclosure the decline of the housing market could have been prevented!!! But first the borrowers would need to read the disclosures. And that is the truth.

By Diane Gerdes   The "Economy Cupcake"

During this historic economic time, more disturbing news was announced this week that will have a disastrous effect on my afternoon coffee and candy habit: Sugar is at its highest price since the 1980’s! Starbucks is already adding 30 cents to my favorite low fat beverage, with all of the sugar infused ingredients of, Mint Mocha Chip Frappuccino with Chocolate Whipped Cream. Tell me it ain’t so… I am already drinking my wine from a box. (My friends that read this, sorry, I keep the old wine bottles for nostalgia and bring them out when I have company. In my defense I never really knew the purpose of a funnel before. 

Having trouble getting your loan modified? Join the club. The bullying from our government to get the party started has been stalled again with a ruling by a federal judge. It seems that the banks were dancing the worm when they thought that if they modified loans it would give them immunity against any lawsuits from their original investors, as directed by the Helping Families Save Their Homes Act. They interpreted the Act as giving them permission to ignore their contractual obligations including money back guarantees. The judge decreed that they did not have protection under the new legislation; therefore if a loan is modified, they will be required to refund the investors their original investment. That safe harbor may become a hurricane of hurt that the magical accountants may not be able make disappear.

FYI: The soothsayers jubilantly boogied the Geithner side step after today’s housing numbers reflected that homes are being sold at an astonishing rate and Ben Bernanke, Fed Chair, stated that the economy is returning to growth. July’s gain for existing home sales was the largest monthly increase recorded for existing home sales since 1999 according to the NAR.

FYI 2: The $8,000 first time tax credit will be eliminated November 30^th, it will be here before breakfast!

By The "Economy Cupcake"

The sky was approaching twilight as I was driving home in my couldn’t get cash-for-my-clunker, listening to my am radio, missing my satellite network because I still can’t afford any extras. The soothsayers were jubilant that the unemployment numbers for July pointed to fewer people without jobs and as a result the markets rallied. Earlier this week the core Personal Consumption Expenditures, or PCE: a reflection of our spending power, excluding food and gas, reported a modest increase and put some teeth into the report that we are out buying stuff again. The nails have been removed from the coffin of our housing market with the positive resale and new build numbers.

Shockingly Freddie Mac and AIG have risen from their almost graves and both showed a hefty profit due to the hocus pocus accounting of ignoring write-offs. Fannie Mae does not have the same accountant and was left in the dark with a loss of 14.8 billion dollars and asked their favorite Uncle for 10 billion more to help pay the bills. Fannie and Freddie have drank $85bn of the Treasury’s bloodline so far, while the Federal Reserve has bought more than $1,000bn worth of their debt and mortgage-backed securities to try to push mortgage rates down. The Feds are trying to figure out the future living arrangement with Fannie and Freddie. Three may be a crowd.

The cash sucking actually began in recent years with the first government bailout of Chrysler in 1980. And again 1998 the Fed saved a hedge fund that the big boys screamed could not fail or it would hurt. And they cannot be allowed to feel pain. Banks are lining up again for the second round of a cash infusion. Wooden stakes anyone?

FYI: Basha’s filing of Chapter 11 was a shock. E. J. Montini’s recent column in the Arizona Republic reported that in the late 1980’s when Eddie Basha heard that one of his competitors was having a rough time he lent him one of his trucks and when his credit lines were cut off, helped him acquire food for his stores. He expected nothing in return. At the time, Basha’s refused to allow the Republic to publish anything about his action of kindness. Sometimes competition just isn’t about winning.

BY THE "ECONOMY CUPCAKE"